Unemployment is still higher than any peak seen during the global financial crisis: Economist
The Labor Department released its May jobs report on Friday, adding 2.5 million payrolls to the United States. KPMG Chief Economist Constance Hunter joins Yahoo finance’s On The Move to discuss.
Video Transcript
- And I wanted to talk about the big news today, and that is the jobs report. We are seeing an increase last month in 2 and 1/2 million jobs. That is very unexpected. Economists were predicting a drop of 7 and 1/2 million. We are going to dig into that in just a moment.
The unemployment rate, by the way, also better than estimated, at 13.3%. 19% was the consensus estimate from economists. We are seeing stocks gain on all of this. The Dow right now is up about 3.6%. It's above 27,000. The S&P is above 3,200. It's up to 2.9%. The NASDAQ up 2.1% and over 9,800. So we're definitely seeing a positive reaction in the markets to all of this.
I want to bring in Constance Hunter now. She is the chief economist at KPMG to talk about this. And Constance, you just need to unmute yourself so we can dig into these numbers. Again, really a surprising number for a lot of folks that we saw there.
Constance, what do you think-- what do you think happened here? I mean, you know, sometimes we see a surprise. But this is a pretty big gap.
CONSTANCE HUNTER: Well, we saw this pre-saged actually in the ADP data. And everybody was very surprised that that number was so much lower than expected. And it was still negative, about 2 and 1/2 million jobs. So that got us really digging in and saying, what if that-- what is the correct projection? What if this is really going to be much better than expected?
Of course, it was even better than that. But let's put this all into context. Right? 13 and 1/2% unemployment is still higher than any peak seen during the global financial crisis. So we still have a long way to go. We saw about 11% of the jobs that were lost come back in May. And we think a lot of this is due to the PPP program, which does stipulate that people have to be rehired.
And let's just unpack that for a minute. When people are rehired, they have to maintain that employment for 24 weeks. And if after that time the economy has not sufficiently recovered to keep those employees in place, then employers can lay off those workers with no penalty. That is, they can still receive forgiveness for their PPP loan.
So I think we're far from out of the woods. There's a lot of this story to retell. With that said, economics happens at the margin. It looks like the nadir is in. And we just have to see how rocky is the road ahead as we climb out of this terrible, terrible abyss that we fell into.
- Hey, Constance. It's Adam. So when you talk about how rocky is the road ahead, is this something we should pay attention to? That people not on temporary layoff, the number of permanent job losers, continues to rise in this report, up by 295,000, bringing that number to 2.3 million. I mean, are we missing something when we see that from the Bureau of Labor Statistics?
CONSTANCE HUNTER: No. I don't know that we are. I think, like in any recovery, this is going to be a two speed recovery. We saw that coming out of the global financial crisis. We have every reason to think that that is going to occur as we come out of the COVID crisis, that it's going to be a two speed recovery. And so you're going to see pockets of good alongside pockets of bad. And those two have to be reconciled and understood at a deeper level to really see what's going on within the economy.
RICK NEWMAN: Hey, Constance. Rick Newman here. I wonder if you can help us square the numbers. So the total number of new unemployment insurance claims since mid March is over 42 million. But the total number of officially unemployed people is half that. It's 21 million. So does that suggest that we're not counting some people correctly? Or does it suggest that half of the people who filed unemployment claims have now gone back to work? Or what?
CONSTANCE HUNTER: So Rick, that's a really great question. And there is an important gap. Because people who are self-employed were able to apply for unemployment benefits, those people are actually not counted in the establishment survey. And we think that that accounts for several million people that are getting the unemployment benefits.
Of course, that doesn't explain all of the gap. And we're continuing to dig in, talking to people at BLS about these different signals from these two data sets. And so it bears more digging in. But that feature of those people who are self-employed collecting unemployment is certainly an important feature of this.
And we also have those PUA numbers, right, that account for those that are affected by the pandemic. And that's a really, really significant number of people.
- Constance, what, if anything, can we extrapolate from this report about the idea that some have put forward that because what people are receiving in unemployment benefits in some cases is more than they were earning, that it's keeping them from going back to work?
CONSTANCE HUNTER: So I've heard anecdotes on both sides of this. And this is where it really is important to dig in and look under the numbers. So some people are saying, look, I'm having problems getting my workers back cause they're saying, listen, at this wage it doesn't make sense for me to go back. I'm getting more in unemployment insurance. But, you know, if you get offered your job back and you say no thank you, that means you assume that down the road you're going to be able to get another job or go back to that same employer. I think that people are concerned that if they say no now that job or another job may not be there in two to three months when these extended unemploy-- or these increased unemployment benefits run out.
So there is a risk. Even if it is creating more stickiness in the labor market, there is certainly a risk for employees to not take their jobs back.
- Constance, it's good to see you be well. Constance Hunter is KPMG chief economist, talking us through that confounding jobs report to many. Thanks, Constance.
